In July, CMS publishes the major proposed regulations impacting Medicare policies and payments for physician office and hospital outpatient and ambulatory surgery center services forcing medical societies and many CRD clients to spend the remainder of their summer analyzing the effect of the proposed changes on the specialty and coming up with, on occasion, the rationale in support of CMS’ proposals or more likely developing a justification for CMS to not proceed with its plans. This summer is no different. One glimmer of hope is the recent bi-partisan effort of the House Energy and Commerce Committee to finally repeal the formula known as the Sustainable Growth Rate (SGR) and stabilize physician payment for the next five years.

We at CRD have been following this closely and find ourselves once again entrenched in the hundreds of pages released by CMS. Medicare Physician Fee Schedule Proposed Rule for CY 2014.

The fact remains that only Congress can change the sustainable growth rate (SGR) formula, which makes it even more difficult to decipher some of these proposals since CMS must act on current law, but Congress knows it is very likely to change that to avoid payment cuts before they go into effect. Many provisions, like the update in the conversion factor (the monetary index, which determines payment rates under the fee schedule) is dependent on the SGR formula. Additionally, CMS is continuing its efforts to reduce payments for services considered “mis-valued,” which this year was expanded to include over 200 diagnostic tests and procedures where payment for the practice expense for the service is greater in the physician office than when provided in the hospital outpatient department. This will have a significant impact on radiation oncology, neurology, diagnostic testing centers and independent labs. For CY 2015, CMS proposes to establish a separate payment for complex chronic care management services furnished to patients with multiple (two or more) complex chronic conditions that are expected to last at least 12 months. Complex chronic care management services include physician development and revision of a plan of care, communication with other treating professionals, and medication management.

Finally, in an effort that continues to tie quality of care to payment, the proposed rule outlines and attempts to harmonize the various quality reporting initiatives associated with the Fee Schedule, including the Physician Quality Reporting System (PQRS), the Shared Savings Program (ACOs), the EHR meaningful use program, and the physician value-based payment modifier. Both PQRS and the EHR programs have moved to a penalty phase for physicians who do not participate in the program.

CMS also released their Medicare Hospital Outpatient Prospective Payment System (OPPS) rule. Payments made under OPPS cover resources in the hospital outpatient setting, including equipment, supplies, and hospital staff, but do not include services of physicians or non-physician practitioners paid separately under the Medicare Physician Fee Schedule. Services under OPPS, which are clinically similar and require similar resources are classified into payment groups called Ambulatory Payment Classifications (APCs) and a payment rate is established for each APC. The APC payment rates are adjusted for geographic cost differences, and payment rates and policies are updated annually through rulemaking.

Payment rates under OPPS have been relatively stable over the past several years and this year CMS is proposing a 1.8% inflationary update. In this rule, CMS is proposing some dramatic increases in the packaging of services paid under OPPS. The objective of these changes is to give hospitals greater incentives to use the most cost efficient items and services that meet the patient’s needs rather than being incentivized to use more expensive items and/or provide additional adjunct services. CMS hopes that packaging will encourage hospitals to more effectively negotiate prices with manufacturers and suppliers and establish protocols that ensure that only necessary services are provided.

House Energy and Commerce Committee Passes Legislation to Repeal SGR

By far the biggest news coming out of Capitol Hill if you’re involved in Medicare payment policy is that on July 31, the House Energy and Commerce Committee approved HR 2810, Medicare Patient Access and Quality Improvement Act of 2013 by a unanimous and bi-partisan vote. The legislationwould repeal the current payment Sustainable Growth Rate (SGR) formula and provide for a 5-year period of annual payment updates set at 0.5% each year and initiate a quality performance system in 2019. A summary of the legislation is available on the Energy and Commerce CommitteeWebsite.

One provision remains a concern to many medical societies and the American Medical Association (AMA). The bill authorizes CMS to reduce up to 1% of payments under the physician fee schedule for services identified as mis-valued. While CMS currently makes these types of reductions in the fee schedule, the cuts occur in a budget neutral manner and CMS will use reductions in some codes to increase payment for others and for new codes for primary care services. While the Committee made some changes to the provision to set the baseline for the reductions at the 2015 payment level, it is a provision that physician groups will ask to be removed from the legislation as it moves forward.
Senate Finance Committee Chairman Baucus and Ranking Member Hatch have announced that they are working on their own verison of an SGR fix over the August recess. As usual, August will not be a quiet month for those of us who follow these issues closely.

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